Free Motion in Limine - District Court of Arizona - Arizona

EXHIBIT A

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CONTAINS CONFIDENTIAL BUSINESS INFORMATION
washrngton, D. C.

RE

CE

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V1ff STATES INTERNATIONAL TRADE COMMISSION Before the Honorable Robert L. Barton, Jr. Administrative Law Judge

JUN 13 2005
,j,L`'

In the Matter of CERTAIN POINT OF SALE TERMINALS AND COMPONENTS THEREOF
Inv. No. 337-TA-524

ORDER NO. 48; IMPOSING SANCTIONS, JOINTLYAND SEVERALLY, ON COMPLAINANT VERVE; SIMON, GALASSO AND FRANTZ; AND RAYMOND GALASSO AND ]KEVIN IMES

(June 7, 2005) l I. SUMMARY 1
On April 11, 2005, I issued Order No. 40 denying Respondents' Joint Motion for Sanctions; denying motions of Respondents Lipman and Thales for Sanctions based on 19 C.F.R. §210.4; and ordering Complainant Verve LLC ("Verve") to show cause why sanctions should not be unposed (Show Cause Order). On May 5, 2005, Verve filed a response to Order No. 40. (Verve Response). On May 16, 2005, Respondents filed a joint reply to Verve's response to the Show Cause Order concerning sanctions. (Respondents' Joint Reply). On May 24, 2005, the Commission Investigative Staff {"Staff") filed a response to Verve's response (Staff Response). On May 23, 2005, Verve filed a motion for leave to reply to Respondents joint reply, which I am permitting. (Verve's Reply). Verve also sought leave to respond to Staffs response, which I deny. I have found that sanctions are warranted in this case based on Verve's inadequate pre-filing investigation and the numerous misrepresentations made by Verve to the Commission, which I find

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2 were made -in bad faith. I hereby impose sanctions upon Verve, LLC; Simon, Galasso & Frantz, L.L.C. (SGF); Raymond M. Galasso; and Kevin R. Lanes, jointly and severally, in the. amount of $1,000,000 to be paid to the Commission within ten days from the issuance of this order. IL PROCEDURAL BACKGROUND Verve filed the complaint on August 2, 2004 claiming that Respondents "directly, indirectly, contributorily, and/or by inducement" infringed Claims I and 2 of U.S. Patent No. 5,012,077 ("the `077 patent"), drawn to credit/debit card processing terminals. Complaint's 10, Exh. D col. 6,11.17'33. The Complaint was signed by Cbristopher Walton of the SGF law firm, and the Verification of Complaint was signed by Kevin Imes. The accused products were various point of We debit/credit card processors Verve asserted infringed the `077 patent and were imported by, arnong others, Hypercom Corporation C Hypercom'}, Thales e-Transactions, Inc. and Thales e-Transactions, S.A. (collectively, "Thales"), Lipman USA, Inc. and Liprraan Electronic Engineering, Ltd. (collectively, "Lipman"), Ingenico S.A. and Ingenico Corp. (collectively, "Ingenico"), and VeriFone Inc. ("VeriFone") (collectively, "Respondents"). Complaint 110, Exh. A. CompIaintant asserted ownership of the patent pursuant to assignment from Omron Tateisi Electronics Company ("Omron" ). Complaint ¶T 9, 50. On January 3, 2005, Respondent Hypercom filed a motion, supported by Thales, Lipman, Ingenico and VeriFone, and supported in part by Staff, to terminate the investigation based on Verve's lack of standing. Verve opposed the motion. Hypercom assented in its motion that Verve lacks standing to maintain this i nvestigation at the Commission because it does not own all substantial rights to the patent- at-issue and that some of those rights remain vested in the assignee, Omron. In opposing the motion, Verve argued that it possessed the requisite standing, and also

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argued in the alternative that it should be permitted to join Omron as an involuntary co-complainant or to allow Verve and Ornron the opportunity to amend the patent assignment agreement. In Order No. 31, issued on February 7, 2005, I found that Verve lacked 'sufficient standing by itself to maintain this investigation without,the joinder of Omron. Order No. 31 at 11. Finding dismissal of the investigation for Verve's lack of standing to be premature, however, without giving Omron an opportunity to join as a co-complainant, I directed Verve to state by February 11, 2005 whether or not Omron would do so. Id. On February 11, 2005, Verve filed a statement that Ornron did not intend to participate in the investigation, and thus Verve filed a motion for. withdrawal of the complaint and termination of the investigation (524-034). See Verve LLC's Statement Regarding the Participation of Omron Corporation in the Present Investigation (February 11, 2005). On February 16 and 17, 2005, Staff filed its response in support of Verve's motion to terminate the investigation, and Respondents filed various responses either in opposition to the motion or to defer ruling on the motion. I stated in Order No. 31 that I was nu' ndful of the prejudice that the other parties may have suffered due to Verve's actions. Order No. 31 at 12. Therefore, I directed those Respondents who believed that sanctions were justified based on Verve's conduct to file motions for sanctions by no later than February 18, 2005. Id. On that date, Respondents Hypercom, Ingenico, Lipman, Thales, and VeriFone filed a Joint Sanctions Motion (524-037). Also on that date: (i) Ingenico filed an additional memorandum in support of the Joint Sanctions Motion ("Ingenico Memorandum'); (ii) Thales filed a.supplemental motion (524-036) for sanctions presenting additional arguments in support of the Joint Sanctions Motion ("Thales Supplemental Motion"); and (iii) Lipman filed a motion (524-038) for sanctions and in support of the Joint Sanctions Motion ("Lipman Motion").

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On March 10, 2005, Verve filed a joint response in opposition to all of Respondents' motions for sanctions.
On Much 18, 2005, Staff filed separate responses to the Joint Sanctions Motion, the Thaler

Supplemental Motion, and the Lipman Motion, opposing sanctions requests on the basis of the motions themselves because of Respordents' failure to adhere to the safe harbor" rule of 19 C.F,R. § 210.4(d)(1)(i) prior to filing their motions with the Commission. However, Staff argued that it would be appropriate for me sua sponte to issue a show cause order to Verve as to why sanctions should not be imposed. Staff listed seven actions by Verve that would be appropriate subjects for a show cause* order. Staff Response to the Joint Sanctions Motion at 10-11. On April 1, 2005 Verge filed 'a reply to Staff s Response to the faint Sanctions Motion. On April 11, 2005,1 issued Order No. 40 denying Respondents' Joint Motion for Sanctions; denying the motions of Respondents Lipman and Thales for sanctions; and ordering Complainant to show cause why sanctions should not be imposed (Show Cause Order). The Show Cause Order required Verve to address the following issues: (a) whether Verve acted in bad faith by not conducting an adequate pre-filing infl ngement analysis of Respondents' accused point-of-sale terminal devices prior to filing Verve's complaint in this investigation; and (b) whether Verve acted in bad faith by making false and/or unsubstantiated allegations in Verve's Complaint about-the existence ofa domestic industry that practices the'077 patent. Shove Cause Order at 31-32. On May 5, 2005, Verve filed a response to Order No. 40 (Verve Response). On May 16, 2005, Respondents filed a Joint Reply to Verve's Response to Order No. 40 (Respondents Reply). On May 23, 2005, the Staff filed a response to Verve's Response to Order No. 40 (Staff Response).

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On May 23, 2005, Verve filed a motion for leave to reply to Respondents joint reply. Commission Rule 210.15(e) provides that the moving.party shall have no right to reply, except as permitted by the Administrative Lawludge or the Commission. 19 C.F.R.§ 210.15(c). Respondents Hypercom, Ingenico, Lipman and Thales have filed oppositions to the motion for leave to reply, and quite frankly their points are well taken. Nevertheless, I am exercising my discretion to allow Verve's motion to reply to Respondents' joint reply, but I note that several of the points in.Verve's reply could have been and should have been in its orignal response to the Show Cause Order. In particular, Verve should have discussed the pre-filing investigation it did with respect to all of Respondents' products accused of infringement in the Complaint, rather than waiting until the reply to do so. However, the omission is not particularly prejudicial to Respondents because, even after considering Verve's further reply, I have concluded that Verve, its principals, and its counsel acted in bad faith and should be sanctioned. Verve's further request to file a reply to Staff s response is denied. Verve has been given the opportunity to file many lengthy pleadings with respect to the sanctions issue. On March 10, 2005 Verve filed a thirty-five page response to 'Respondents' motions for sanctions; on April 1, 2005 Verve filed a twenty-eight page response to Staff's response to Respondents' motions for sanctions; on May 5, 2005 Verve filed a thirty page memorandum in response to the Show Cause Order; and on May 23,2005 it filed a thirty page reply to Respondents'- joint. reply. I note that Verve also requested and was given, over Respondents' strenuous objections, a two week extension to file its original response to the Show Cause Order. Now it seeks to file yet another reply, this time to Staff's response. This request is denied. At some point the briefing must end. Verve has been given ample opportunity to address the sanctions issue.

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III. DISCUSSION A. ALJs and Commission p ower to Impose Sanctions for Abuse of Process Commission Rule 210.4(c) states in petinent part as follows: "By presenting to the presiding administrative law judge or the Commission (whether by signing, filing, submitting, or later advocating) a pleading, written motion, or other paper, an attorney or unrepresented party orproposed party is certifying that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances (1) It is not.bei;ng presented for any improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of the investigation or related proceeding; (2) The claims, defenses, and other legal contentions therein are warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of 'new law; (3) The allegations and other factual contentions have evidentiary support or, if specifically so identified are likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and (4) The denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on a lack of information or belief." 19 C.F.R. § 210.4. (Emphasis added).

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7 This requirement is often called the duty of candor.
The Commission has the power to prescribe sanctions for abuse of discovery and abuse of process to the extent authorized by Rule 11 of the Federal Rules of Civil Procedure. -19 U.S.C. §1337(h). The Commission has chosen to exercise this power in Rule 210.4(d), which gives the Administrative Saw Judges the power to impose sanctions for violations of the duty of candor discussed in Rule 210.4(c). "If, after notice and a reasonable opportunity to respond ... the presiding administrative law judge or the Commission determines that paragraph (c) of this section has been violated, the administrative law judge or the Commission may. impose an appropriate sanction upon the attorneys, law firms, or parties that have violated paragraph (c) or are responsible for the violation. A representation need not be frivolous in its entirety in order for the administrative law judge or the Commission to determine that paragraph (c) has been violated. If any portion of a representation is found to be false, frivolous, misleading, or otherwise in violation of paragraph (c), a sanction may be imposed." 19 C.F.R. § 210.4(d). (Emphasis added). The Commission has also given the administrative law j edges the power to impose sanctions
sua sponte.

Rule 210.4(d)(1)(ii). But there are special considerations when an administrative law

judge does not rely on a motion for sanctions but instead seeks to impose sanctions sua sport#e. The Jrudge. must direct the attorney or party to show cause whyy it has not violated Rule 210.4(c). Rule

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8 210.4(d)(1)(ii). The show cause order does not shift the burden of proof for the imposition of sanctions but facilitates due process requirements. Cook v. American Steamship Co., 134 F.M 771, 776 (6s' Cir.1998). "[A] show cause order only acts as notice to the relevant party by informing the' party what conduct is alleged to be sanctionable, and allows the party an opportunity to respond; by presenting evidence and arguments why sanctions should not be imposed, the party has the opportunity to `persuade' the court that sanctions. are not warranted." Id. In the situation where a judge seeks to impose sanctions sua sponte under FRCP 11, courts usually have required a showing of bad faith, rather than utilizing the objectively unreasonable standard applied to motions for sanctions. In re Pennie &Edmonds, LLP; 323 F.3d 86, 89-90 (2d Cir. 2002); Barber v. Miller, 146 F.3d 707,711 (9th Cir.1999); Kaplan v. DaimlerChrysler, A.G., 331 F.3d 1251, 1255-56 (11th Cir. 2003); but see Young v: City of Providence ex rel. Napolitano,
Y

404 F.3d 33, 40 (1 st Cir. 2005) (holding that there is no heightened standard required for sua sponte sanctions). When applying sanctions under Rule 11 for conduct that is kin to contempt of court, a bad faith standard should apply. In re Pennie & Edmonds,.LLP, 323 Fad 86, 89-90 (2d Cir. 2002). Because I believe the bad faith standard is the appropriate standard to apply for sua sponte sanctions, I review Verve's conduct under the bad faith standard. A definition of bad faith has often been elusive. In adopting the Eleventh Circuit's definition of bad faith, the Ninth Circuit has stated that "`Bad faith' is not simply bad j udgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity; ... it contemplates a state of mind affirmatively operating with furtive design or ill will." United States v. Manchester Farming Partnership, 315 F.3d 1176,1185 (9th Cir. 2003)(footnote omitted). That is the definition of bad faith that I have used in reviewing Verve's conduct.

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Although Verve asserts that a'sanction should not be imposed because there has been no finding of infringement, Verve Response at 2-3, a finding of infringement is not a pre-requisite to the imposition of sanctions. View Engineering, Inc. v. Robotic Vision Systems, Inc., 208 F.3d 981, 982-84 (Fed. Cir. 2000) (sanctions awarded for failure to investigate 6 of 8 patents despite substantive riling on only 3 patents). B. Verve Initiated This Proceeding In Bad Faith Without Conducting An Adequate Pre-Y+iling Infringement Analysis of Respondents Accused Point -Of-Sale. Devices As I noted in Order No. 40, at p. 11, the key factor i n determining whether a patentee performed a reaonable pre-filing inquiry is the presence of an infringement analysis. At page 4 of its response to Verve's submission, the Staff, quoting Q-Pharma, Inc. v. Andrew Jergtiw Co., 360 F.3d 1295, 1300 (Fed. Cir. 2004), states that "Rule 11, the Federal Rule's analog to the Commission's Rule 210.4 `require[ s], at a minimum, that an attorney interpret the asserted patent claims and compare the accused device with those claims before filing a claim alleging infringement. "' When a patent holder brings an infringement claim, it must be prepared, if challenged, to demonstrate to the court and to the alleged infringer exactly why it believed in the prefiling stage that it had a reasonable chance of proving infringement. Robotic Vision Sys., Inc., 208 F.3d 981, 986 (Fed. Cir. 2000). I agree with the Staff and the Respondents that the case of Judin v. United States, 110 F.3d 784 (Fed. Cir. 1997) is highly instructive in this situation. In Judin, the patentee went to an-industry exhibition, was familiar with trade publications, technical specifications, and commercial literature, and observed the product from a distance but did not attempt to obtain a sample of or test the accused product. Id. at 781. In that case, the Federal Circuit found that the district court abused its discretion View Engineering, Inc. v.

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10 by not imposing sanctions. Id, at 784. Although Verve attempts to distinguish Judlr by relying on
Q _Pharma, I note that in the latter case, in which sanctions were not imposed, the Court noted that

the plaintiff did obtain a sample of the accuser] product and compared it to the patent claims. QPharma 360 F.3d at 1302. The Federal Circuit has not imposed an absolute requirement that a

patentee purchase the accused product before filing suit, but it has taken that factor into consideration l as it did in JudhL As Staff observes at page 7 of the Staff Response, h1r. Imes is an experienced, registered patent agent who was well qualified to perform the pre-filing claim construction but he testified in his deposition that he never examined the prior art cited in 'the `077 patent and also testified that he did not believe anyone at Verve construed the claims of the `077 patentl Verve also acknowledges that it has a number of ongoing patent litigations. Complaint at IM 29-36.. 1VIr. Galasso is listed as SGF's head of technology practice and the author of several articles on patent topics. See http://www.sgfattorneys.com/attomey.htln. Consequently, Verve should therefore be very familiar with the requirements of a pre-filing infringement analysis. I.. Verve Did Not Conduct A Reasonable Pre-Filing Investigation I mote the many misrepresentations that Verve makes'in its Response to the Show Cause Order. On page 5 of its Response, Verve asserts that ivfr. Imes, a principal of Verve, construed the claims of the `077 patent prior to filing the Complaint.

This is deceptive and misleading. The only support that the deposition offers for this assertion is that W Imes is in fact a principal of Verve and not that he construed the claims of the `077 patent.
Verve says on page 5 of its Response that Mr. Imes explained in detail that he independently construed the `077 patent claims in accordance with their ordinary meaning and that the Simon, Galasso, & Frantz firm performed an infringement analysis based on its construction before-filing
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C)

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stmt.

There is no support in the cited pages of

the deposition for the asseitioin that W. Ines explained anything i a detail.. The only thing that Mr. hues had to offer in that-part ofhis deposition was to state that'

When asked what the `we" meant, i

Verve's claim that-Mr. Imes performed the pre-filing claim construction is contradicted by what Mr. Imes said i n his deposition. .

However, Verve said in its Response to the Show Cause Order that its counsel interpreted "automatically" to mean "without human intervention." Verve Response at S.

These pieces of prior art were very important in performing a claim construction and infringement analysis, and Mr. hues failure to even view them is troubling.

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1

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12 In essence, it appears that there was virtually no claim construction performed by Verve prior to the filing of this complaint. Mr. Imes does not even seem to understand what claim construction is. Further, Verve has not been ortluight or candid in its responses to the Show Cause Order.
21 The SOF Law Fitm Did Not Conduct an, Independent Pre-Filing Investigation Under Rule 11, an attorney may not rely solely on tie client's claim interpretation, but must perform an independent claim analysis. S. Bravo Systems, Inc. v. Containment Tech Corp., 96 F.3d 1372, 1375 (Fed. Cir.1996). Verve did not provide an affidavit from any attorney with Simon, Galasso, & Frantz (SGF) stating what was done, if anything, in regard to a claim construction until May 27, 2045, after all other filings had been made, when it attempted to submit a sworn declaration from Christopher Walton, an attorney with the SGF law firm. The declaration was attached to Verve's motion for leave to reply to the Staffs response. Walton's declaration asserts that he reviewed and analyzed the '077 patent and construed claims 1 and 2; that he reviewed the prior art references with respect to the `077patent; and that he conducted an infringement analysis independent from the analysis and testing conducted by Verve. Verve's motion has.been denied, and the declaration is not accepted. Moreover, I must express extreme disapproval of the manner in which Verve, and its current counsel, have acted in response to the Show Cause Order. Any such declaration should have been submitted with Verve's original response to the Show Cause Order, or at the very latest, in its reply to Respondents' Joint Reply.. It would be manifestly unfair to allow this filing and not permit Staff and Respondents to

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13 respond, Verve's attempt to submit an affidavit from the. S G1~ law firm at the verylast moment, after all other briefing has been submitted, does not reflect well on either Verve, or its counsel. Verve's contention in regard to its pre-filing investigation is that Nerve and its counsel reviewed Respondents' devices in their normal commercial setting and concluded that the devices determined the card type automatically as required by the claims. Verve Response at 11. This is yet another misrepresentation by Verve. To support this assertion, Verve cites to Mr. Imes deposition,

Verve claims that Verve and its counsel used Lipman product literature to determine that all of the products at issue here infringed. Verve Response at 11. Complainant has alleged many instances of infringement against many different products. There is no evidence that counsel even reviewed these documents. I note that even if I had accepted Walton's declaration, Walton does not discuss specific products or literature that he reviewed. However, even assuming, arguendo, that the Lipman products or documents were reviewed by SGF, there is absolutely no evidence that SGF did so for the products of the other Respondents that Verve accused of infringement. In particular, I note that Respondents point out that Verve's'Complaint accused at least 17 different products of infringement. Respondents'; Joint Reply at 1. After reviewing the several responses filed by Verve in this proceeding, it is crystal clear that it did not conduct an adequate pre-filing investigation with respect to those products.
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'14 Moreover, despite being -given the opportunity to do so in both in its response to the Show Cause Order and in its reply to the Respondents' Joint Reply, Verve has failed to show that the.SGF law fum performed a proper claim construction. Sanctions are merited when an attomey merely relied bnhis client ratherthan conducting an independent investigation ofthe factual and legal merits of .the claim. S. Bravo Systems 96 F.3d at 1375. demonstrates recklessness and bad faith. 3. Verve And Its Counsel Did Not Conduct A Reasonable Investigation. Into Lipman's Accused Products Aside from the fact that Verve did not construe the claims prior to filing the Complaint. Verve also inadequately investigated Lipman's products. Verve is relying on N4,r. Imes pre-filing investigation in order to satisfy its reasonable pre-filing infringement investigation requirement. Verve Response at 11-15. In its reply Verve acknowledges that it based its conclusions about Lipman's products from fines observation of the Lipman 2085 terminal and concluded that most, if not.all, of Lipman's terminals operate the same way. 1Id at 15-16, This goes beyond mere negligence and

"

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15 In Refac International, Ltd. v. Hitachi, Ltd., a plaintiff was sanctioned for failing to conduct a reasonable pre-filing investigation, when it assumed without justification that all of the- accused products violated one or more of its patents. Refac Int, Ltd. v Hitachi, Ltd 141 F.R.D. 281, 286-87 (C.D. Cal 1991). This appears to be precisely what Verve did. Although it was given the opportunity to present the full array of actions it took with regard to its investigation of Lipman's products, Verve has only brought forth minimal evidence of investigating two products. l agree with Staff and Respondents that Verve's pre-filing investigation with regard to the Lipman products was particularly reckless, and that it has failed to provide evidence in response to the Show Cause Order that it analyzed the Lipman 8320, the product it accused of infringement. See Judin v. United States, 110 F.3d 780,785 (Fed. Cir. 1997) (holding that a trial court's failure to find-a violation of Ruie 11 was an abuse of discretion.where the plaintiff in a patent case only observed an accused device from a distance, did not compare the accused device to the patent claims, and slid not obtain or attempt to obtain a sample of the accused device.) Verve only observed one terminal and obtained literature on another and then accused Lipman's entire Nurit series of infringement. Because it obtained information about only two products and then accused an entire line of products of infringement, I conclude that Verve acted recklessly and in bad faith. Moreover, Verve asserts that Verve and its counsel reviewed Respondent's devices in their normal commercial setting and concluded that the devices determined the card type automatically as required by the claims. Verve also asserts that Mr. Imes tested each of the products at retail locations where those products are commercially used. Verve Response at i 1.' This is a flagrant misrepresentation to the court. With respect to Lipman's products, Verve has failed to demonstrate

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any investigation at all with regards to the other Lipman products. Verve acted in bad faith in filing this complaint without conducting an adequate pre-filing investigation as to Lipman's'products. 4. Verve And Its Counsel Did Not Conduct A Reasonahle Investigation Into Hypercorn's Accused Products In the Complaint Verve alleged that the Hypercom T8 and ICE 6000 terminals infringed the `077 patent. Complaint 110, Exh. A.

Without specifying specific Respondents orproducts, Verve makes abroad general assertion that Imes and Verve's counsel reviewed Respondents' devices in their normal commercial setting,. and concluded that the devices determined the card type automatically as required by the claims. Verve Response at 11, In particular, Verve asserts that Mr. Imes tested each of the products at retail locations where those products are commercially used. I'd. However, Verve did not even discuss its investigation; if any, into Hypercom's accused products in its response but only addressed this point in its reply. Verve Reply at 14-15. 1vlr. Imes' testimony in his deposition belies any assertion that Verve did an adequate prefiling investigation with respect to the Hypercom products.

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In its testing brief, Verve claims that this was an ICE 6000 model. Verve Testing Brief .
at 2.

I conclude that Verve did not perform an adequate pre-filing investigation into flypercom's products. I have reviewed the record that I have, along with Verve's Reply, in order to ascertain what pre-filing investigation Verve did with respect to, Hypercom's products. First, I have not considered the Respondents' assertions as to what terminals may or may not have been present at the OfficeMax. However, I do consider the fact that Verve never obtained any Hypemom product to analyze or test prior to filing. Staff states, and I agree, that falls far short ofwhat the Federal Circuit reguired in Judin. Staff Response at 8-9. What Mr. Imes did can hardly be considered an adequate pre-filing investigation as to
1

Additionally, Verve accused Hypercom's T8 terminal of infringement, and clearly this machine has a button that must be pressed in order to process a debit transaction. Respondents' Joint Reply Exh. 9 & 10. If 1W. Imes or anyone from Verve had observed this device in operation, they should have at least been put on notice of the possibility of non-infiingement, which would have warranted further investigation. Verve's pre-filing investigation falls far short of what is required. Verve's filing of the complaint in the face of virtually no pre-filing investigation of Hypercom's accused products demonstrates an abuse of process and bad faith-

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5. Verve And Its Counsel Did Not Conduct A- Reasonable Investigation Into Ingenico's Accused Products Although in the Complaint Nerve alleged infringement by two Ingenico products (Complaint . at x(10, Exh. A), and even though the Ingenico 5100 model was discussed at length in Order No. 40,. Verve did not address its pre-filing investigatibn of this product in its Response to the Show Cause Order. It waited until its reply to Respondents' .Joint Reply to discuss its pre-filing investigation. In the reply Verve tacitly acknowledges that it-did not test any of Ingenico's products but rather relied on observation of one Jngenico product, the Ingenico eN-Touch 1000, and upon publicly available documentation regarding the operation and specification for the Ingenico 5100 terminal. Verve reply at 17-18. Although I have not credited Respondents' contention that Ingenico does not sell the 5100 model in the United States because they'do not cite record evidence to support this assertion, I am troubled by Verve's failure to address its pre-filing investigation of Ingenico's products until it filed its reply on May 23. Such behaivor does not reflect well on Verve or its current counsel at Dutton & Williams. In any event, even Verve's reply does not constitute a satisfactory response to the Show Cause Order and I conclude that Verve did not conduct an adequate pre-filing investigation of Ingenico's products. Mere observation of one product, and a review of brochures for another product, does not constitute an adequate pre-filing investigation. Verve's action in filing a complaint making accusations of infringement based onso little investigation of Ingenico's products is another example of its recklessness and bad faith.

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6. Verve And Its Counsel Did Not Conduct A Reasonable Investigation Into Thales' Accused Products In the Complaint Verve accuses Thales' Talento terminals of infringing the `077 patent. Complaint at T 10, Exh. A. According to Thales, Verve has not produced any documents or receipts corroborating the testing of the Thales Talento device. Thales Sanctions Brief at 6. The Staff has noted that Verve has not produced the documents in question. Staff. Response to Thales Supplemental Motion for Sanctions at 3. The only documents that have been produced are Mr. Imes'· banking statements. Respondents' Joint Reply at 20, Exh. 22. Verve does briefly discuss its investigation into Thales accused products in its response, by referencing the testimony of Mr. Imes in his deposition to support its contention that it provided this evidence. Verve Response at 15. But Verve has not provided me with enough ofthe deposition to ascertain what records Mr. Imes was referring to, nor has Verve provided me with copies-of any of the receipts or documents it says it produced for Respondents. The only evidence Verve paints to in regards to its Thales investigation is _ Again, Verve has failed to provide enough of the deposition for me to ascertain what was being discussed in this portion of the deposition, but it appears that. Also, as -the Siaff notes, _

I

Staff Response at 11. Verve's attempt to address this issue in its reply is wholly unconvincing. Verve Reply at 19.

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20 Nerve also never obtained a sample of a Thales product. Thales Sanction Brief at 6, Verve
Response at 14. Verve- attempts to explain this by saying that it did not have a merchant account, Verve Response at 14. But Respondents have brought forth evidence showing that the Thales terminals come equipped with a demonstration mode which can be used to show how the terminal works without having a merchant account. Respondents'. Joint Reply at 20, Exh.14, Declaration of Jana Hobbs. Verve's action cannot be considered an adequate pre-filing investigation. 7, Verve And Its Counsel Did Not Conduct ,A. Reasonable Investigation-Into Verifone's Accused Products Verve accused VeriFone's 3200 SE terminals and Everest Pius terminals of infringement, However, Verve did not even discuss the Verifone products in its initial response to the Show Cause Order and it devotes only one short paragraph to this'matter in its reply filed on May 23. In its reply Verve acknowledges that it did not purchase or test Vernfone's products and relied exclusively on W. Imes' observation of one ofthe Verifone products at a retail location. Verve argues that it "4was reasonable to rely on its observation of a single Verifone terminal, and deduce from that that the others infringed in the same way." Reply at 19-20. Verve cites the case of Renesas Technology Corp. Y. Nanya Technology Corp., 2004 WL 2600466,*3 (N.D.Cal.) to support its position. However, the situation. in penesas was quite different because there the plaintiff tested several accused products and used that testing to infer infringement by other products (plaintiff actually reverse engineered three of the, products). R Here, by contrast, Verve relied only on observation, not testing, of only one product. I find that the allegation against Verifone based on such a slender reed consitutes recklessness and bad faith.

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21 C. Verve Acted'iin Bad Faith ByMalkdng False AndlOrUnsubstantiated Allegations in Verve's Complaint About the ExZstence of u Domestic Industry Order No. 40 ordered Verve, its pritteipals Mr. Galasso and Mr-. Imes, and SOF to show, cause as to whether they"acted in had faith by making false andfor unsubstantiated allegations i. Verve's Complaint about the existence of a domestic industry that practices the `077 patent. Order No. 40 at 2U, 32. However, Verve, in its Response, instead focuses on whether or not it could have satisfied.1he domestic indrtsixy rcquiremexnt. Staff Response at 15. That is not what Verve was instructed to address in Order No. 40. As Staff corr dy observes, the issue is vðcr Verve made false 6d/or unsubstantiated allegations in its Complaint eon industry, not whether a domestic industry exists for its products. 1. Verve's Misstatements Regarding NCR In its Complaint Verve alleged that a domestic industry for point-o f-sale terminals wvered by the `077 patent exists because of Verve's extensive domestic patent licensing and also because of Verve's licensees' domestic activities such as research rind development, manufacturing, sales and other operations w=ithin the United States. Supplem.mt to the Complaint at 158. In this regard Verve alleged in its Complaint that the `077 patent is licensed to NCR (fonxnerly National Cash Register) and thatNCR makes, sells, and distributes its point of sale terminals throughout tine United States. Complaint 143. However, this assertion was misleading in two regards. Verve newer directlylieensed the pateattoNCR (Onuon issuedthelieense), =INCRdoes notmake point ofsale tcnuinals- Vcn.c now acknowledges this fact: ' Ververealizes that confusion may exist with respect to that license: ' Verve l^psponse at 26. The confusion exists because Verve was not fortluight in ng issues relating to a domestic

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22 its laint. Verve dismiss 's this as sloppy pleading, Verve.ResPonse at 27, but at bottom it is Comp a misrepresentation. Verve attempts to excuse its conduct by asserting that Verve's showing of a domestic industry is met by its exploitation and licensing of the `077 pattent, and that it went beyond what was required by submitting NCR: claim charts as exhibits to the Complaint. Verve Response at 28. However, Verve misses the point. Even if it did not need to submit claim charts, or to show that one' of its licensees practices the patent, if a complainant does submit such evidence, it may not. misrepresent. As required by Rule 11 and 19 C.F.R. § ·210.4, a party must refrain - from all 'misrepresentations in its pleadings, whether it is satisfying minimal requirements or not. Verve misrepresented that it had licensed the `477 patent to NCR (whereas Omron had issued the license), and it misrepresented that NCR makes, sells, and distributes its point of sale terminals throughout the United States. Verve's contentions that it relied on NCR's 1 OK filings do not help it either. The I OK does not state that NCR makes any of the products, only that NCR provides them. NCR 1 OK at 26. As Staff notes, the figures that Verve used in its complaint seem to encompass all of NCR operations and riot just in regards to the `077 patent. Staff Response at 16. Also, as Staff notes, Verve included unsupported allegations in its Complaint that NCR was practicing the `077 patent by making POS terminals covered by the `477 patent: Complaint 143, Exh. C. The claim charts that Verve submitted of an NCR product do not show that NCR's products meet the critical claim limitations: Complaint, Exh. C, Supplement to the Complaint, Exh. H. Nowhere does Verve claim that it examined NCR products to investigate whether the products were in fact practicing the `477 patent.

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-23 Verve asserts that NCR' s assertion that NCR did not manufacture POS terminals, at least as of November 24, 2004, has not been independently verified. 'Verve Response at 28. However, Verve has had more than an ample opportunity to independently verify NCR' s assertions. If Verve had wanted to question NCR representations, it should have investigated them. It chose not to do so. By making indorrect statements about NCR to support its domestic industry claim, Verve has . done more than engage in sloppy pleading, it has actively misrepresented facts. 2. Verve's Forty Personnel Commission Rule 210.12 requires a complaint to provide a description of the facilities and . number and type of workers employed in the production of the involved domestic article. 19 C. .R. § 210.2. In its Complaint, Verve' alleged that: Verve began as a two person organization but has grown substantially since 1998, enlisting'the services of over'forty personnel that cover a wide range of professional resources including market analysts, patent assessors, licensing agents, technical analysts, licensing attorneys, litigants and support staff, all of which are domestically based. Supplement to the Complaint, T 61 (emphasis added). This assertion was noted in Order 40. Order 40 at 18. Verve has since admitted that it has no employees. Verve Response at 21. But in its Response Verve still maintains that the statement concerning its personnel is literally true. Verve Response at 21. Verve asserts that the statement conveys precisely what it was intended to convey, because Verve uses or enlists outside contractors or personnel rather than hiring full time employees. Verve Response at 22. However, that assertion was rejected by the Honorable Judge Charles Bullock when he was presiding over this case.. In an Order issued on October 27, 2004, Judge Bullock stated that " fa] lthough Complainant attempted to explain the inconsistency away by stating that it `intended to communicate to the Commission the concept that while Verve has no employees

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24 as that terra is defined statutorily [by the Internal Revenue Code], it has engaged or employed (and regularly engages and'employs) the services of many (over forty) contractors to provide a variety of services to it' (see Verve's Response to OrderNo. 9 at 4), this explanation is wholly inadequate and raises serious issues as to the reliability of the representations made in the Complaint." Order.to Complainants to. Show Cause Why Simon, Galasso & Frantz Should Not Be Disqualified, OrderNo. 10 at, 4-5. Merriam Webster Collegiate Dictionary, Tenth Edition defines personnel as a body of persons usually employed (as in a factory, office, or organization) (emphasis added). Further, as Staff points out, if Verve had wanted to convey that it was only a two-person organization without any employees, it should not have used the word "began" when it was referring to its supposed former status as a two-person organization. Staff Response at 18-19. By first making a deceptive statement about its personnel, and then continuing to assert its untenable position in its various pleadings, Verve has demonstrated bad faith. 3. Verve's Principal Place of Business Order No. 40 also addressed Verve's statement in the Complaint that its principal place of business is at 8127 Mesa Drive, PB-246-67, Austin, Texas 78759, Complaint ^ 1, Order 40 at 19, whereas in fact the address given is a P.O. box at a UPS store. The Commission Rules of practice require a complainant to state the name, address and telephone number of the complainant. 19 C.F.R. § 210.12(a)(1). Black's Law Dictionary, Seventh Edition, defi nes principal place ofbusiness as the place of a corporation's chief executive offices, which is typically viewed as the nerve center. It is difficult to seriously- onsider a mailbox at the UPS Store to be the nerve center of a companyVerve argues that Respondents have not cited any authority that a complainasit's use of a post-office box as its principal place of business is relevant to the domestio.industry requirement.

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25 1 Verve's Response at 23.. Verve cites to a case from the Northern District of Texas to support its contention that a principal place of business may be a post office. Verve cited one sentence out of the four page opinion which says, "[wjhile the administrative office may be a nucleus of activity for the company, it just as easily may be a passive P.O. box." Parker Y. Southern Farm Bureau Casualty
Ins. Co., 2001 WL 1335832 at *4 (N.D. Tex. 2001). The court in dicta made this statement, but it

was in no way indicating that the administrative office was the principal place of business. The court fwrther stated elsewhere in the opinion that the total activity test, which looks at the nerve center and place of activity, is applied to determine a corporation's principal place of business, Icy at *1 However, the issue here is not whether a company may use a post office lox but rather whether Verve Wsrepreserated the nature of its principal place of business in this proceeding, l conclude that Verve did misrepresent the nature of its place of business and indeed its business . operation. . 4. Verve's Bad Faith With Respect To The Domestic Industry Allegations .A complainant in a Section 337 proceeding is expected to be -truthful, honest and forthcoming. Half-truths, misleading statements, and deceptive filings have no.place in these proceedings. Section 337 investigations proceedings are massive,. expedited proceedings usually involving very technical issues and the Commission and its Staff expect that all parties, particularly a complainant seeking relief from the Commission, will be completely forthright and open. Even 'literally, truthful but misleading statements cannot be tolerated. I agree with the Staff that if Verve had made only one of these misrepresentations with. respect to the domestic industry issue, perhaps a finding of bad faith with respect to the domestic industry claims would not be warrarited. Staff Response at 21. But because -of the - numerous

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26,

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deceptive clihns made by Verve in the Complaint and throughout the course ofthis proceeding, the only logical conclusion is that these were made in an attempt to deceive. the Conu nission and its . Staff. TV. APPROPRIATENESS. -OF SANCTIONS Having found that Verve acted in bad faith on multiple occasions throughout this investigation, I must now decide if sanctions are appropriate. "If, after notice and'a reasonable. opportunity to respond, the court determines that subdivision (b) [duty of candor] has been violated, the court may, subject to the conditions stated below, impose an appropriate sanction upon the attorneys, law firms, or parties that have violated subdivision (b) [duty of candor] or are responsible -for the violation." Fed. R. Civ. P.11(c). Monetary sanctions emanating from a show cause order may only be imposed in the form'of a penalty, not attorney fees. The purpose of Rule I 1 is to deter misrepresentations and baseless filings. Anderson v. County of Montgomery, 111 F.3d 494, 502 (7th Cir. 1997), overruled on other grounds, Dewalt v. Carter, 224 F.3d 607 (7th Cir. 2000). Because .1 believe that Verve has engaged in the type of behavior that this rule was designed to prevent, i find that the imposition of sanctions in this case is warranted. I must now decide the amount, if any, of sanctions to be i mposed. A Rule 1 t sanction is not meant to reimburse opposing parties for their costs of defeme. "A sanction imposed forviolation of this rule shall be limited to what is sufficient to deter repetition of such conduct. or comparable conduct byothers similarly situated." . Fed. R. Civ. -P. 11(c)(2).

I

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27 In calculating the amount of the sanction in this proceeding, I have considered and rejected all of the proposals by the various parties, namely, Verve, the Respondents, and the Staff, Verve asserts that fro sanction is warranted, other than dismissing the Complaint without prejudice as it has requested, but that ifa monetary sanction is imposed, it should be minimal (such as $5,000). Verve Response at 30. By -contrast, Respondents assert that a large penalty should be, imposed. Respondents in their Joint Reply assert that they have expended $4.2 million in attorney fees and costs. Joint Reply at 29-30, Exhibit 21; 15. Staff recommends a penalty of $2 million. It arrives at this figure by taking Respondents' base figure of $4.2 miRion in litigation expense, rounding up to $5 million, dividing by the nurnber of Respondents (five); and then doubling the resulting $ 1 million, resulting in a recommended penalty of $2 million. Staff Response at 22-23. Staff also suggests that the SGF first, including Mr. Galasso, Mr. Walton, and Mr. lmes be publicly reprimanded. Id at 23. I reject. each of these proposals. First, as to Verve's proposal, I agree that dismissal of the Complaint is serious but considering Verve's failure to conduct a proper pre-filing investigation, and'the blatant misrepresentations in the Complaint and throughout the proceeding, neither dismissal nor the payment of a small sanction such as $5,000 is sufficient. Respondents suggest a penalty equal to the amount oftheir legal expenses but the cases they cite concerned motions for sanctions, not sanctions imposed pursuant to a show cause order. The latter type of sanctions are Meant to deter, not compensate. Moreover, Respondents' assertion that they expended $4.2 million in litigation expenses is supported only by an a ffidavit by Stuart Huang, one of their counsel. Respondents do not provide any documentation supporting this statement or detailing their legal expenses. 'Therefore, I give no weight to this assertion. Consequently, Staff's

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28 analysis also is flawed because it relies on Respondents' $4.2 million claim. In any event, Staff does not explain why it is appropriate to round up to $5 million. Although a $ 2 million sanction might . be appropriate, Staffs analysis is not convincing. Admittedly, it is difficult to craft any sanction amount with-precision, In trying to craft an appropriate sanction in this case, I have examined the"Standards and Guidelines for Practice Under Rule 1 i of the Federal Rules of Civil Procedure," .("Guidelines"), issued by the American Bar Association 5 ection of Litigation in 1998. Although the Guidelines were issued prior to the revision of Rule 11 in 1993, the Guidelines do contain a list of possible mitigating and aggravating factors to consider in assessing Rule 11 sanctions. These are as follows: Among the factors which the court may consider (1) as militating in favor of, or against, the i mposition of a particular sanction, or (2) in the case of a monetary sanction, in assessing the amount thereof, are: a. the good faith or bad faith of the offender; b. the degree of willfulness, vindictiveness, negligence or frivolousness involved in the offense; c. the knowledge, experience and expertise of the offender; d. any prior history of sanctionable conduct on the part of the offender; e. the reasonableness and necessity ofthe out-of-pocket expenses incurred by - the offended person as a result of the misconduct; f. the nature and extent of prejudice, apart from out-ofpocket expenses,..suffered by the offended person as a result of the misconduct; g. the relative culpability of client and counsel; and the impact on their privileged relationship of an inquiry into that area; h. the risk of chilling the specific type of litigation involved; i. the impact ofthe sanction on the offender, including the offender's ability to pay a monetary sanction; j. the impact of the sanction on the offended party, including the offended person's need for compensation; k. the relative magnitude of sanction necessary to achieve the goal or goals. of the sanction; 1. burdens on the court system attributable to the misconduct, 'including consumption of judicial time and incurrence of juror fees and other court costs; m. the degree to which the offended person attempted to mitigate any

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'29

prejudice suffered by him or her; n. the degree to which the offended person's own behavior caused the expenses for which recovery is sought; o. the extent to which the offender.persisted in advancing a position while on notice that the position was not well grounded in fact. or warranted by existing law or a good faith argument for the extension; modification or reversal of existing law, and (p) the time of, and circumstances surrounding, any voluntary withdrawal of a pleading, motion or other paper. [citations omitted) 121 F.R.D. 101, 125-26. I will now discuss each of the factors listed in the Guidelines above. As to the first factor, factor (a), the good faith or bad faith of the offender, I have already found that Verve was acting in bad faith in regard to its conduct. With respect to the second factor, factor (b), I find that the degree of willfulness, negligence, or 'frivolousness involved here is high, for the reasons discussed above and the sheer number of false allegations made. With respect to factor (c), as discussed above; Verve and its principals purport to have a high degree -of knowledge, experience and expertise in the area of patent law. · Concerning factor (d), any prior history of sanctionable conduct, there is no evidence before me that is- subsfantiated or relevant to this inquiry. As to factor (e), the reasonableness and necessity of the out-of-pocket expenses incurred by the offended person as a result of the misconduct are hard to determine in this case. In Respondents' Joint Reply, they make the bald allegation that they have spent $4.2 million in legal fees in defending this case. Respondents' Joint Reply at 29, But Respondents have not produced evidence to show . the amount of their attorneys' fees, the reasonableness of their attorneys' fees, or anything beyond
a mere conclusory statement to support their reported expenditures. Therefore, I will not credit the

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30 $4.2 million figure. However, given the extensive discovery and motion practice in this litigation, it is reasonable to expect that Respondents' litigation expenses have been substantial. With respect to factor (f), the nature and extent of prejudice to the offended parties in this case, apart from litigation expenses, is great. Beyond the high expenses incurred in this proceeding, the disruption to their business activities and the time taken by the Respondents and their employees in compiling information in this case is presumably also high: It is difficult to imagine defending a patent infringement case without expending a great deal of time and energy by a company's employees, aside from the time and expense associated with legal representation. As to factor (g), the relative culpability of client and counsel, it appears that both are equally. . -responsible. Verve relied almost exclusively on W. Imes. As Mr. Imes is a patent agent, he should be familiar with what constitutes a reasonable pre-filing investigation, but I have concluded that his pre-filing investigation was wholly inadequate. As for SGF, even were Mr. 'Walton's declaration taken at face value, it does not appear that SGF conducted an adequate,pre -filing investigation of the various products accused of infringement. I conclude that both Verve and SGF ale equally culpable. Considering factor (h), the imposition of sanctions is unlikely to chill parties from prosecuting patent infringement claims. When a patent owner believes that there has been infringement, it is likely that it will incur the expense and trouble of defending that patent, but, hopefully, the imposition of sanctions will deter Verve and others from filing baseless, misleading, and deceptive pleadings. Factor (i) concerns the impact of -the sanction on the offender, including the offender's ability to pay a monetary sanction; factor () concerns the impact of the sanction on the offended party, including the offended person's need for compensation; and factor (k). concerns the relative

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.31

n

magnitude of sanction necessary to achieve the goal of the sanction. Verve has acknowledged that it allocated a large budget for this proceeding. See Confidential Exhibit B, submitted to Staff via cover letter from &egory Donahue, counsel for Verve, dated August 18, 2004.

A small sanction, sueh as $ 5,400, would have no impact Whatsoever. 'As for factor 0), it does not apply here because the sanction is not being paid to the Respondents. With respect to factor (k), the relative magnitude of the sanction necessary to achieve the goal or goals of the sanction also weighs in favor of a high sanction in this case. Even after the Complaint was filed, .and Verve's misrepresentations and unsubstantiated allegations were uncovered, Verve continued to attempt to mislead Respondents, the Commission Staff, and the Judges. 1 conclude that a substantial sanction is necessary to deter Verve, and others, from further violations of the Commission's rules. Factor 0) is particularly attuned to burdens on the court system rather than agency litigation. Nevertheless, the Commission has limited resources to deal with Section 337 proceedings. The Office of Unfair Import Investigations has a relatively small number of attorneys, and there are only four Administrative Law Judges. The burdens on the administrative. litigation system caused by a CONFIDENTIAL INFORMATION
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I

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32 party that "stonewalls," makes misleading statements, and engages in outright misrepresentations is considerable. Anyone familiar with Section 337 litigation is well aware that these proceedings are extremely labor intensive, on the part of the Commission, its Staff and the ,Administrative Law Judges and their staff. Marty hours of judicial resources have been consumed in dealing with these sanction issues because Verve failed to perform an adequate pre-filing investigation and also made misrepresentations in its Complaint and throughout the proceeding. As to factor (m), attempted mitigation by the offended party, and factor (d), the degree to which the offended person 's own behavior caused the expenses for which recovery is sought, the Respondents, certainly tried to mitigate any prejudice by conducting discovery and filing several motions in an attempt to uncover evidence. Verve only provided truthful information after being 1 1 compelled to do so. Certdnly Respondents did not cause the problems associated with the. lack -of pre-filing investigation or the misrepresentations by Verve. Another significant factor in this analysis, factor (o), is the extent to which the offender persisted in advancin g a position while on notice that the position was not well grounded in fact or warranted by existing law or a good faith argument for the extension, modification or reversal of existing law. As has been discussed at length, Verve has persisted in its misleading and deceptive conduct throughout this proceeding, even after orders highlighting these concerns weze issued by Judge Bullock in Order No. 10 and by myself in Order No. 40, The final factor in the Guidelines, factor (p), is the time and circumstances surrounding any voluntary withdrawal of a pleading, motion, or other paper. While Verve has sought tU withdraw its Complaint, it slid not do so until after T ruled in Order No. 3 l 'that it lacked standing to continue

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33 with this lawsuit. Also, it did not do so until many of its misdeeds had come to light. Therefore, I do not mind this to be a mitigating factor in this proceeding. Given the number of aggravating factors discussed above, and the substantial amount of money budgeted by Verve for prosecuting the ITC proceeding, - a substantial sanction should be assessed to deter any future deceptive conduct. In this instance I conclude that a sanction in the amount of $1,000,000 is the minimum necessary to accomplish this purpose. V. CONCLUSION Because of the egregious nature of its conduct and the sheer number of flagrant and continuing misrepresentations made during this proceeding, I fl6d that Verve, LLC; Simon, Galasso & Frantz, P.L.C.; Raymond M. Galasso; and Kevin R. Ines have acted in bad faith-, and I hereby assess a fine in the amount of $1,000,000, which shall be made in a check payable to the United States Treasury, and submitted to the Commission within ten days from the date of this order. I do not adopt Staff s suggestion that the SGF firm, Mr. Galasso, Mr. Walton, Mr. Donahue, and Mr. Imes should be publicly reprimanded. In my view, the finding of bad faith and the imposition of a monetary sanction are sufficient. Within seven days of the date of this document, each party shall submit to the Office of the Administrative Law Judges a statement as to whether- or not it seeks to have any portion of this document deleted from the public version. The parties' subn-issions may- be made by facsimile and/or hard copy by the aforementioned date. Any party seeking to have any portion of this document deleted from the public version thereof must submit to this office a copy of this document with red brackets indicating any portion

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34 asserted to contain confidential business information. The-parties' submissions concerning the public version of this document need not be filed with the Commission Secretary,

SO ORDERED.

Robert L. Barton, Jr. Administrative Law Judge

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IN THE MATTER-OF CERTAIN POINT OF SALE' TERNUNALS AND COMPONENTS THEREOF

337-TA-524

CERTIFICATE OF S

I,.Madlyn R. Abbott, hereby certify that the attached CONFIDENTUL ORDER was served upon, Stever R. Pedersen, Esq., Commission Investigative Attorney, and the following parties via first class snail and air mail where necessary on Jutie 8 2005,

Marilyn R.. Arbon, Secretary U:S. International Trade Commission 500 E Street, S.W,, Room 112A Washington, D.C. 20436

FOR COMPLAINANTS VERVE L.L.C.; Christopher S. Walton, Esq. Gregory S. Donahue, Esq. SIMON, GALASSO & FRANTZ, PLC. 115 Wild Basin Road suite 107 Austin, Texas 78746 Stephen J. Rosenman, Esq. DEWEY BALLANTINE, LLP 1775 Pennsylvania Avenue, N.W. Washington, D.C. 24006-4605 Emerson V. Briggs, M, Esq. Thomas A. Anderson, Esq. Bradley T. Lennie, Esq. Bryan F. Moore, Esq. HUNTON & WILLL4MS, LLP 1900 K Street, N.W. Washington, D.C. 20005

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IN THE MATTER OF CERTAIN.POINT OF SALE TERMINALS -AND COMPONENTS THEREOF

337-TA.;524

Carolyn H. Williams, Esq. Brian Neach, Esq. Constance T. Forkner, Esq. WILLIAM .& CONNOLLY LLP 725 12'' Street NW Washington, D.C, 20005 Bryan Famey, Esq. Jeffrey B. Plies, Esq. Cabrach Connor, Esq. DEWEY BALLANTINE, LLP 401 Congress Avenue Suite 3200 Atistin, TX 78701 FOR RESPONDENTS THALES' &TRANSACTIONS S.A. AND THALES F, TRANSACTIONS, INC.: Kevin M. O'Brien, Esq. D. James Pals, Esq. Michael E. Murphy. Esq. Lisa A., Murray, Esq. BAKER & McRENZIE, LLP 815 Connecticut Avenue, N.W. Washington, D.C. 20006 john G. Flaini, Esq. Brian C. McCormack, Esq. William D. McSpadden, Esq. Richard Wells, Esq. BAKER & McMNZIE, LLP 2300 Trammell Crow Center 2001 Ross Avenue Dallas, Texas 75201

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IN THE MATTER'OF-CERTAIN POINT OF SALE TERMINALS AND COMPONENTS THEREOF

337-TA·524

FOR RESPONDENTS CYBERNET, USA, INC., & CYBERNET, INC:
John B. Sganga; Jr. Esq. Jon W. Gurka, Esq. Irian A. Lateef, Esq. . KNOBBE, MAR'T'ENS, OLSON & BEAR, LLP2040 Main Street Fourteenth Floor Irvine, CA. 92614 FOR RESPONDENTS LIPMAN USA, INC. AND LIPMAN ELECTRONIC ENGINEERING, LTD: Charles F. Schill, Esq. William R. McCarty, Esq. Susan Koegel, Esq. Stuart T.F. Huang, Esq. STEPTOE & JOHNSON, LLP 1330 Connecticut Avenue, N.W. Washington, D.C. 20036-1795 FOR RESPONDENT HYPERCOM CORPORATION: Sid Leach, Esq. David O. Caplan, Esq. Andy Halaby, Esq. Nate Smith, Esq. SNELL & WILMER, L.L.P. One Arizona Center 400 East Van Buren

Phoenix, Arizona 85004-2202
FOR RESPONDENT :VERII{ ONE, INC: Owen W. Dukelow, Esq. KOLISCH HARTWELL, P.C. 200 Pacific Building

.520 S.W. Yamhill Street Portland; OR 97204

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IN THE MATTER OF CERTAIN POINT OF SALE TERMINALS AND CONY TONEN'TS THEREOF

337,TA-524

FOR RESPONDENTS INGENICO S.A., d/b/a/ GROUP INGEIVICO AND INGENICO CORPORATION., Ruffn B. Cordell, Esq. Lauren A. Degnan, Esq. Mark. E. Wadrzyk, Esq. Rama G. Elluru, Esq. FISH & RICHARDSON, P.C. 1424 k Street, N.W. 11'x' Floor Washington, D.C. 20005 Larry S. Nixon, Esq. James T. Hower, Esq. Jonathon T. Reavill, Esq. Robert W. Faris, Esq. NIXON & VANDERRYE P.C. 1100 North Glebe Rd. 8' Floor Arlington, VA. 22201-4714

FOR RESPONDENT TRINTECH INC. AND TRINTECH GROUP PLC:

Paul F. Brinkman, Esq. AL·STON & BIRD LLP 601 Pennsylvania Ave., NW Washington, DC 20004 E. Joseph Benz, III ALSTON & BIRD LLP Bank of America Plaza .101 South Tryon Street, Suite, 4000 Charlotte, NC 28280

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